Granting an Informal Lease Extension
A leaseholder has approached you directly. Agreeing terms outside the statutory route gives you flexibility — including the ability to retain ground rent income.
In short
What is an informal lease extension?
An informal or voluntary lease extension is one agreed directly between freeholder and leaseholder, outside the statutory procedure under the 1993 Act. The term, the ground rent and the premium are all matters of negotiation rather than prescribed by statute.
How does it differ from a statutory extension?
A statutory extension gives 90 years on top of the existing term at a peppercorn ground rent, on terms the Act prescribes. An informal extension can be for any length, may retain a ground rent, and can vary other lease terms by agreement.
Can a freeholder keep the ground rent?
Yes. This is the principal difference. Under the statutory route the ground rent is extinguished; by agreement it can be retained, which preserves an income stream and affects the premium payable.
Are the freeholder’s costs recoverable?
Not automatically. Outside the statutory scheme there is no statutory entitlement to costs, so liability for the freeholder’s valuation and legal fees must be agreed at the outset.
What you can agree
Outside the statutory scheme nothing is prescribed. The term, the ground rent and the premium are all matters for agreement, which is the whole advantage of the route.
Any term the parties choose
A new lease of 99, 125, 250 or 999 years, or any other figure that suits both sides. A leaseholder’s lender may have a minimum requirement, and that often shapes the discussion, but there is no statutory term to work to.
Extend the term and keep the ground rent
The most useful option available to a freeholder and the one the statutory route removes entirely. You can grant a longer term while retaining the ground rent for the remainder of the existing term, so the income continues as before and only ceases when it would have done anyway.
Subsidise the premium in exchange
Retaining the income has a value, and it is normal for the premium to be reduced to reflect it. How far to subsidise is a valuation judgement rather than a negotiating instinct — our valuers model the trade-off so you can see what income you are keeping and what premium you are giving up to keep it.
Correct the lease at the same time
A defective repairing covenant, an unworkable service charge apportionment, a missing right or an outdated provision can all be dealt with while both parties are willing. That opportunity does not arise on a statutory claim, where the terms of the new lease largely mirror the old.
Why it may suit you
01
You control the terms
The statutory route prescribes 90 years at a peppercorn. By agreement, the term and the ground rent are negotiable.
02
Ground rent can be retained
The single largest difference. Under the statutory route your income ends; by agreement it need not.
03
Speed and lower cost
No notices, no statutory timetable, and lower legal costs on both sides.
04
Other terms can be corrected
An opportunity to update an outdated lease, fix defects or address service charge provisions while both parties are willing.
Process and timescales
| Stage | What happens | Typical elapsed |
|---|---|---|
| Approach received | A leaseholder writes or telephones. Nothing is committed at this stage, and nothing should be conceded in the reply. | Day 0 |
| Valuation and options | We value the interest and model the alternatives: term only, term with retained ground rent, and the statutory equivalent, so the comparison is on figures. | Weeks 1–3 |
| Proposal and cost terms | A written proposal setting out the term offered, the ground rent treatment, the premium, and who bears the costs. Cost liability must be agreed here, not later. | Weeks 2–4 |
| Negotiation | Usually short, because both parties are there voluntarily. If it becomes protracted the leaseholder may simply serve a section 42 notice instead. | Weeks 3–8 |
| Heads of terms | The agreed position recorded before solicitors are instructed, so the drafting follows a settled deal rather than reopening it. | Week 6–10 |
| Documentation and completion | Arcadia prepares the deed of variation or new lease, deals with lender consent where required, and completes. | Months 2–5 |
There is no statutory timetable, so a voluntary extension can complete considerably faster than a statutory claim — or drift indefinitely if neither side drives it. Momentum matters more here than anywhere else.
What to be careful about
Your costs are not automatically recoverable
Outside the statutory scheme there is no entitlement. Cost liability must be agreed before work begins, or you will bear it yourself.
The leaseholder retains the statutory right
If your terms are unattractive they can simply serve a Section 42 notice instead. An informal offer needs to be realistic to be worth making.
Value the concession properly
A shorter term with retained ground rent is worth a different figure from 90 years at a peppercorn. The two are easily conflated, usually to the freeholder’s cost.
Consider the reform position
Ground rent proposals in the draft Commonhold and Leasehold Reform Bill may affect the future value of retained income. That should inform what you agree today.
What we do
Value the interest on the proposed terms
Modelled both ways — statutory and informal — so you can see the difference in real figures.
Advise on what to offer
What to concede, what to hold, and what a realistic counter-proposal looks like given the leaseholder’s alternative.
Agree cost liability at the outset
Documented before work begins, so you are not left carrying your own fees.
Prepare the documentation
Drafted and completed by Arcadia Law.
Where we act
myfreehold is based in London and acts for freeholders across all 32 London boroughs and the City of London, and regularly for clients with property interests throughout England and Wales.
Managed programmes for retained clients
Where a client holds a number of reversions, we operate voluntary lease renewal and freehold disposal programmes on a retained basis. Rather than dealing with approaches one at a time as they arrive, the whole exercise is run for you.
Valuation across the portfolio
Every interest valued, with the options modelled: term only, term with retained ground rent, and the statutory comparison. You see the aggregate position before anything is offered.
Proposals issued and managed
We approach leaseholders or respond to them, issue proposals on agreed parameters, and handle the correspondence. You are not fielding enquiries or chasing responses.
Heads of terms agreed
Negotiated within the parameters you have set, and recorded before solicitors are instructed so that drafting follows a settled deal.
Legal work through to completion
Arcadia prepares and completes the documentation, dealing with lender consents, title and registration.
Reporting
You receive a single view of where each interest stands, what has been agreed and what remains open, rather than a file per transaction.
The point of a managed programme is that you do not administer it. Decisions stay with you; the process does not. It suits portfolio landlords, resident freehold companies, charities and corporate owners who hold reversions but have no wish to run a conveyancing operation alongside their actual business.
Batched lease renewals
We have particular experience granting lease renewals in batches rather than singly. It arises most often after a successful collective enfranchisement, where the leaseholders now own the freehold through a company and want their leases extended to 999 years at a nil ground rent; for resident freehold companies wanting all the leases brought up to a common term; for freeholders selling off flats individually where a saleable term is needed before marketing; and following a new build or conversion where the leases were granted at different times or on inconsistent terms.
The post-enfranchisement case is the most common of the four and the most straightforward, because the company and its members are on the same side. What it still requires is care: the grants must be made properly by the company, non-participating leaseholders must be dealt with consistently, lender consents obtained, and the value flowing between the company and individual members considered so that nobody is unfairly advantaged.
Dealing with them together is materially more efficient than one at a time: the valuation work is done once across the building, the documentation is standardised, and the terms end up consistent rather than accumulating differences that cause difficulty on a later sale or claim.
Common questions from freeholders
Do I have to agree to an informal extension?
No. There is no obligation to negotiate outside the statutory scheme. But if your terms are unattractive the leaseholder can serve a section 42 notice, and you will then be in the statutory process with the ground rent extinguished and no ability to shape the terms.
Can I keep the ground rent?
Yes, and this is the principal reason to consider the voluntary route. You can grant a longer term while retaining the ground rent for the remainder of the existing term. Under the statutory route the rent becomes a peppercorn and the income ends.
What term should I offer?
Whatever suits both parties. 99, 125, 250 and 999 years are all common. The leaseholder’s lender may impose a minimum requirement, which often drives the answer, but there is no statutory figure to work to.
How much should I reduce the premium by if I keep the ground rent?
That is a valuation question. Retaining income has a calculable value, and the premium should reflect it. Our valuers model the trade-off so the subsidy is a measured decision rather than a round number.
Are my costs recoverable?
Not automatically. Outside the statutory scheme there is no statutory entitlement, so cost liability must be agreed at the outset — usually by undertaking from the leaseholder’s solicitors or by fees payable in advance. Agreeing it late, or not at all, means you bear it.
Is it a new lease or a deed of variation?
Either. A deed of variation extends the existing lease; a surrender and regrant creates a new one. Which is appropriate depends on the extent of the changes, the lender position and the title. Arcadia will advise on the right mechanism.
Will the leaseholder’s lender need to consent?
Usually, where the flat is mortgaged. A variation affecting the lender’s security requires their consent, and obtaining it is often the slowest part of the process. It is worth raising early rather than discovering it at completion.
Can I correct problems in the lease at the same time?
Yes, and it is one of the underrated advantages. Defective covenants, unworkable service charge apportionments and missing rights can all be dealt with while both parties are willing. A statutory claim gives no such opportunity.
Should I be concerned about leasehold reform?
It is worth factoring in. Proposals affecting ground rents in existing leases remain under consultation, which bears on the future value of retained income. That should inform what you agree today rather than prevent you agreeing anything. See our page on leasehold reform.
What if we cannot agree?
Then the leaseholder may serve a section 42 notice and the matter proceeds under the Act. That is not a failure so much as a change of route, and we would advise you on the statutory position at that point. See served with a Section 42 notice.
Had an approach from a leaseholder?
Tell us what has been proposed and we will value the interest on those terms, advise on what to offer, and set out how the informal route compares with the statutory one.
Make an enquiry
Valuation
Blakes Surveyors Ltd
Company no. 9184264
RICS regulated firm no. 752265
Legal
Arcadia Law Ltd
Company no. 10043933
SRA no. 629605
myfreehold is a joint enterprise between Blakes Surveyors Ltd, regulated by the Royal Institution of Chartered Surveyors, and Arcadia Law Ltd, authorised and regulated by the Solicitors Regulation Authority (SRA no. 629605). Both companies are registered in England and Wales.
Registered office: 15 Approach Road, Raynes Park, London SW20 8BA
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